Small Old WIndsor Life Pension - What to do with it ?

YorkieGrey

Hi All,

Hoping someone may be able to help, I have no idea about pensions, my mum has just received a statement from Reassure, for an old windsor life pension she took out in the 80's.

Mum only paid in for about 10 years and then kind of forgot about it, we have had no other correspondence until this annual statement popped through. I think she just thought she had lost the money.

Anyway, Dad has a good personal pension that he has always paid into which they had planned to cover them into retirement .

The current value of the pension pot on the annual statement is £11,472

Mum is 61 now, is she able to take all of the pot now ? or is there anything better to do with it.

Thanks in advance for any help/guidence we are a little bit in the dark with this

thanks

YorkieGrey

xylophone

What information has Reassure give about access to the policy?

Your mother is currently employed? Is she a member of an employer's scheme and/or any other schemes and currently contributing?

If so, what type of scheme(s)?

She can make a personal appointment with Pension Wise.

https://www.pensionwise.gov.uk/?gclid=CNiM7OrKhdICFYe_7Qodzn0JpA

Has she obtained a new state pension statement?

Has your father?

https://www.gov.uk/check-state-pension

YorkieGrey

Hi xylophone.

Mum worked until she was in her mid fifties, it looks like both Mum and Dad will get a state pension. Dad also has a private pension that he has always paid into so it looks like that will give him an income aswell.

This winsor life pension of Mum's only ever had really small contributions paid into it and in the letter from ressure it says it would give her £649.

I will take a look at pensionwise and make an appointment.

Reassure have just said they will send options out in the post for her to look at

thanks for your advice

YorkieGrey

kidmugsy

A good way to proceed is as follows: first check whether your mother has a Guaranteed Annuity Rate at Windsor Life. If she has it might well be excellent value to buy the annuity, but she probably doesn't have one. Also check whether there is any advantage she'd give up by drawing down the pension or transferring it to another provider if that proves necessary. There probably won't be.

If drawing down is not compatible with the rules of Windsor Life then she'd have to transfer to another provider first. This is dead easy: you complete a form for the other provider and then they do everything for you.

Right: preliminaries over. The next big deal is her tax position. Can I take it that she has very little taxable income at the moment? If so she could take the lot out tax-free, as follows. 25% comes out as a tax-free lump sum (£2868), the other 75% as taxable income (£8604), but taxed at 0% as your mother has little other income. There's one complication: tax would be withdrawn initially by the provider using the emergency tax code that HMRC obliges them to use. Your mother gets the tax back by phoning HMRC to explain.

Next, here's a lovely wheeze she could use. She then contributes £2880 to a pension (e.g. a SIPP) in this tax year; the provider adds the tax relief to make it up to £3600. Then next tax year she draws down much of that £3600 tax-free (she'd want to leave enough behind in the pension to avoid any charge for emptying the pension). She repeats year after year. You'll see that she'll be conjuring £720 p.a. out of thin air. This is perhaps a foolishly expensive way for the taxpayer to subsidise old folk, but you might as well use it while it still exists.

P.S. Another good deal (if relevant) might be for her to buy any years of missing National Insurance Contributions to ensure that she gets full State Retirement Pension in due course.